Two Conversation Starters to Spring Clean Your Investment Strategy

By Brian Andrew, Chief Investment Officer, Merit Financial Advisors

If the arrival of Spring has you longing to clean up more than just your house, you’re in good company. While life events like the purchase of a home, marriage, or birth of a child are natural triggers to reassess your financial picture, only 35% of Americans have a financial planning professional helping them set their investment goals.

While experts recommend revising your financial strategy at least once a year, there’s certainly merit to using tax time when all of your financial documents are in order to dust off your plans.

This year, keep those useful data points close by and consider these three questions when speaking with your financial planner, or interviewing a new one!

1. Where Do I Start?

The most important thing any investor should do before tinkering with their finances is ensuring they have a solid financial plan that is aligned with their goals – but even that can require some rethinking. For example, just because you created a plan when you got married, it may not still fit with your current life as a parent preparing for your children to go to college.

Another misstep is categorizing your assets as liabilities: people usually think of a house as an asset, but the mortgage is really a liability. Owning a home is wonderful, but you must always keep the right perspective: as an investor, I need to save this much, and invest in that way to produce this sort of return. Continue to solve the equation.

So, before you think of revising your strategy, first make sure that you are on the right track to meet your goals. Remember, the plan tells you what you need to earn as a return on the assets, so use that information to reassess your portfolio. Then, rebalance or make changes to the investment portfolio based on what the plan tells you what to do or what’s happening in the markets.

Once you have the foundational components in check, it’s time to refine!

2. Should I Be Reconsidering My Cash Position?

Investors usually consider their assets in a handful of buckets, like cash, short-term savings for a purchase like a car, or long-term savings that will fund college or retirement. It’s always important to understand if each asset is funded at the right level. With respect to cash, consider if you have spent down any substantial amount of emergency funds in the past year. Experts agree that keeping between six to twelve months of expenses in cash is smart to comfortably cover essentials like housing, food and utilities, but as the cost of living has increased due to inflation, it might be time to reassess if this is realistic.

It’s true that the yield on cash has changed dramatically, too. For so long, investors could only expect a meager return on their savings account, but now there are plentiful options available that offer a high-yield (sometimes up to five percent) with an equally liquid investment. Money market funds are low-risk, short-term investments that help generate additional income, and high-yield savings accounts at online banks “can pay up to 10 to 12 times the national average of a standard savings account.”

Speak with your advisor to be sure you’re not leaving money on the table!

Spring is About New Beginnings

Your relationship with your financial advisor can be one of the longest and most rewarding of your life. Investors who choose to work with a professional and speak honestly about what matters most to them often find a clearer path to pursuing their goals. Indeed, a good financial advisor can become a close confidant over time. And like any good friend, it helps when they can keep you honest. This might mean you need extra support navigating the market shocks that will inevitably occur over the years.

Throughout my career, the biggest mistakes I’ve seen from investors are behavioral. When the papers start whispering the word “recession”, it might be time to take a gut check. By and large, the stock market has continued to appreciate over the last few decades. It’s important to temper your emotional reaction against short-term events, and a quick call to touch base with your advisor can help allay any fears that you can withstand the storm. Remember, investing in the market should be for the long haul. Conversely, savvy investors take advantage of down markets to buy stocks on sale. Perhaps a quick mindset shift is all you need to see the light at the end of the tunnel.

This Spring, take the time to answer your advisors’ request to meet or find a new advisor who can help you dust off an old strategy or begin a brand new one. Looking for a new financial advisor? Contact Merit Financial Advisors today for a complimentary consultation.

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Brian Andrew is solely an investment advisor representative of Merit Financial Advisors, LLC, and not affiliated with LPL Financial. Any opinions or views expressed by Brian Andrew are his own and are not those of LPL Financial.

Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Merit Financial Group, LLC, an SEC registered investment adviser. Merit Financial Group, LLC and Merit Financial Advisors, are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.